SANDPIPER NORTH APARTMENTS v. AMERICAN NAT. BANK

SANDPIPER NORTH APARTMENTS v. AMERICAN NAT. BANK
1979 OK 124
600 P.2d 332
Case Number: 50652
Decided: 09/11/1979
Supreme Court of Oklahoma

SANDPIPER NORTH APARTMENTS, LTD., A LIMITED PARTNERSHIP, SANDPIPER SOUTH APARTMENTS, LTD., A LIMITED PARTNERSHIP, CHET LEONHARDT, JR., KARROL SPENCE, AND SIDNEY DAVIDOFF, APPELLANTS,
v.
AMERICAN NATIONAL BANK AND TRUST COMPANY OF SHAWNEE, SHAWNEE, OKLAHOMA, A NATIONAL BANKING CORPORATION, MIDWEST ENGINEERING, INC., A CORPORATION, DALE B. MORROW, ROBERT E. MORROW, SUE MORROW, T.R.G. TRUST, A TRUST ORGANIZATION, T.R. GARRETSON, TRUSTEE FOR DEFENDANT MIDWEST ENGINEERING, INC., AND T.R.G. TRUST, APPELLEES.

Appeal from the District Court, Pottawatomie County; Lloyd H. Henry, Trial Judge.

¶0 Owners and general contractor, on two construction projects, sought recovery of funds paid jointly to a sub-contractor and its assignee bank under sub-contracts and not applied on lienable claims of the sub-contractor on the construction projects. Petition contained four causes of action. Trial court sustained general demurrers as to each cause of action. Owners and general contractor appeal. REVERSED AND REMANDED.

Raymond E. Tompkins, Hanson, Peterson & Tompkins, Inc., Oklahoma City, Kenneth Abernathy, Abernathy & Ingram, Shawnee, for appellants.

Richard N. Steed, Steed & Bushong, Shawnee, for appellee, American National Bank and Trust Company of Shawnee.

Eagleton, Nicholson & Pate, Oklahoma City, for appellee, T.R. Garretson, Trustee for Midwest Engineering, Inc.

Speck, Philbin, Fleig, Trudgeon & Lutz, Oklahoma City, for appellees, Robert E. Morrow and Sue Morrow.

Houston & Klein, Inc., Tulsa, for appellee, Dale B. Morrow.

LAVENDER, Chief Justice:

¶1 Midwest Engineering, Inc., a corporation, and one of the appellees (Midwest), entered into three separate sub-contracts on two apartment complex construction contracts for a total of six sub-contracts with the general contractor, Chet Leonhardt, Jr. (contractor), an appellant. One owner was Sandpiper North Apartments, Limited, a limited partnership, and the other owner was Sandpiper South Apartments, Limited, a limited partnership. The owners and the general contractor are encompassed in the term "contractors" and constitute the appellants. The three separate sub-contracts with Midwest contain the same general terms and are principally for (1) plumbing, (2) heating and air-conditioning, and (3) utilities.

¶2 Midwest gave an assignment of the proceeds of its sub-contracts to American National Bank and Trust Company of [600 P.2d 333] Shawnee (bank) as security on bank loans financing Midwest's sub-contracts. Contractor was given knowledge of and approved the assignments as provided in the sub-contracts. Contractor made progress payments on the sub-contracts' work jointly to Mid-west and the bank, with those funds placed in an account with the bank. From the account, some lien claimants of the sub-contractor were paid. Other monies from this account were applied to other Midwest indebtedness. Contractor subsequently cancelled the sub-contracts for failure of Mid-west to keep the construction projects free of lien claims. Contractors brought action to recover amounts paid under the sub-contracts with the bank included as a defendant.

¶3 Contractors' petition, as amended, contained four causes of action. Bank filed a general demurrer against each cause of action. Trial court sustained those demurrers, and dismissed the case. Contractors appeal. Though all defendants are named appellees in the petition in error, only the bank briefs and by that brief agrees the appeal issue is the sustaining of its general demurrers testing the petition as to its stating a cause of action.

¶4 Contractors contend a cause of action was stated under (1) a statutory construction fund trust, (2) a constructive trust, (3) a third party beneficiary contract, (4) an estoppel, and (5) the Uniform Commercial Code.

¶5 The statutory construction fund trust of 42 O.S. 1971 §§ 152 , 153 was applied in D. McGlumphy v. Jetero Construction Co., Inc., Okl., 593 P.2d 76 (1979), and held an obligation was owed to the contractor for proper distributing of construction funds in payment of valid lienable claims. McGlumphy, supra, discussed the problem of impressing construction funds with the trust obligation from their source and the need for notice or knowledge that the monies come from transactions encompassed in §§ 152, 153. Language

¶6 With this jurisdiction having available to it a statutory construction trust fund theory established by legislation as public policy, we decline to recognize and apply legal theories of constructive trust, third party beneficiary contract, and estoppel as basis to impress construction funds with a trust to pay lienable claims. The trial court was in error in sustaining the demurrer as to the first cause of action under the statutory trust fund application. We do not reverse its decision as to the second, third, and fourth causes of action.

¶7 We do not pass on contractor's contention of a cause of action under 12 A § 9-318(1)(a, b).

¶8 Reversed and remanded.

¶9 All of the Justices concur.

Footnotes:

1 "A trust, statutory or otherwise, is governed by common law principles. Thus, trust funds do not lose their character as such merely by being deposited in a bank for the individual credit and account of a person whom the law, in effect, makes a trustee . . . * * *."

2 "(1) Unless an account debtor has made an enforceable agreement not to assert defenses or claims arising out of a sale as provided in Section 9-206 the rights of an assignee are subject to

(a) all the terms of the contract between the account debtor and assignor and any defense or claim arising therefrom; and

(b) any other defense or claim of the account debtor against the assignor which accrues before the account debtor receives notification of the assignment."